Howard Bancorp, Inc. Reports First Quarter 2021 Results

Howard Bancorp, Inc. (NASDAQ: HBMD) (“Howard Bancorp” or the “Company”), the parent company of Howard Bank (“Howard Bank” or the “Bank”), today reported its financial results for the quarter ended March 31, 2021.

First Quarter 2021 Highlights

• Strong net income growth:
  • Net income, of $6.2 million for the quarter, was up 86% from first quarter of 2020 and up 39% from fourth quarter of 2020
  • Core net income, ¹ of $6.2 million for the quarter, was up 134% from first quarter of 2020 and up 13% from fourth quarter of 2020
• Strong earnings per share growth:
  • Earnings per share (“EPS”), both basic and diluted, of $0.33 for the quarter, was up 83% from first quarter of 2020 and up 38% from fourth quarter of 2020
  • Core EPS, ¹ both basic and diluted, of $0.33 for the quarter, was up 136% from first quarter of 2020 and up 14% from fourth quarter of 2020
• Strong pre-provision net revenue (“PPNR”) ¹ growth:
  • PPNR, ¹ at $9.4 million for the quarter, was up 49% from first quarter of 2020 and up 30% from fourth quarter of 2020
  • Core PPNR, ¹ at $9.4 million for the quarter, was up 35% from first quarter of 2020 and up 7% from fourth quarter of 2020
  • Core PPNR, as a percentage of average assets, ¹ 1.50% for the quarter, was up 0.31% , or 31 basis points “BP”), from first quarter of 2020 and up 12 BP from fourth quarter of 2020
• Strong loan growth:
  • Total loan growth of $81.5 million during the quarter, including $33.9 million of Paycheck Protection Program (“PPP”) loans
  • Portfolio loan ¹ growth (which excludes PPP loans) of $47.5 million during the quarter (11.2% annualized growth rate)
• Stable / improving net interest margin:
  • Net interest margin, at 3.43% for the quarter, was up 4 BP from fourth quarter of 2020
  • Operating net interest margin, ¹ which excludes the impact of loan fair value accretion and net income from PPP lending, was 3.20% for the quarter, down 1 BP from fourth quarter of 2020
• Stable asset quality:
  • Loan deferrals of $54.2 million at March 31, 2021 (2.8% of total loans and 3.1% of portfolio loans
  • Nonperforming assets to total assets was 0.62% as of March 31, 2021, down 16 BP from first quarter of 2020 and down 17 BP from fourth quarter of 2020
  • Provision for credit losses was $1.0 million for the quarter, down $2.4 million from first quarter of 2020 and down $700 thousand from fourth quarter of 2020
  • Net charge-offs were $1.8 million for the quarter, or 0.43% of average total loans (annualized)
  • Allowance for loan losses was 0.94% of total loans and 1.05% of portfolio loans ¹ as of March 31, 2021; compared to March 31, 2020, up by 18 BP and 29 BP, respectively; compared to December 31, 2020, both down by 8 BP

• Good expense management:
  • Noninterest expenses were $12.3 million for the quarter, down 15% from both first quarter of 2020 and fourth quarter of 2020
  • Core noninterest expenses, ¹ were $12.3 million for the quarter, flat compared to first quarter of 2020 and down 5% from fourth quarter of 2020
• PPP update:
  • $95.7 million of PPP loans funded during the quarter
  • $60.1 million of 2020 PPP loan originations forgiven during the quarter

¹ These are financial measures not calculated in accordance with generally accepted accounting principles (“GAAP”). Please refer to the section entitled “Reconciliation of Non-GAAP Financial Measures” in this press release and to the financial tables entitled “GAAP to Non-GAAP reconciliation” for a reconciliation to the most directly comparable GAAP financial measures.

Mary Ann Scully, Chairman and CEO, commented, “The first quarter of 2021 demonstrated significant tangible progress towards our goal of driving revenue-led PPNR growth and returns which is, in turn, generating positive operating leverage. Revenue growth was led by commercial loan growth, through net origination of both portfolio loans and PPP loans, funded by low-cost deposits. This was accompanied by strong cost control and resource allocation devoted to customer-facing staff. We believe our low noninterest expense to average assets ratio positions us well against peers and reflects three years of focus on both branch optimization and core process improvements. However, we are proudest of our revenue growth as we believe that confirms differentiation. Our net interest margin is stable despite a very challenging low interest rate environment and, as the asset mix continues to shift toward loans, the margin should improve. Howard Bank’s historical emphasis on full commercial relationships has allowed us to significantly lower our cost of funds and that tailwind has almost completely offset the headwinds of compressed yields in both the loan and the securities portfolios. Those lower yields have been exacerbated by a higher proportion of assets in low-yielding but high-quality securities. The headwind of lower commercial line usage contributes to this excess liquidity, as does higher commercial deposit levels maintained by former net borrowers.

Strong commercial loan origination led to annualized double-digit growth in C&I balances. This growth was gen